01—Abstract
Summary
Summary of the 10-K filed February 29, 2016. Cited figures are marked; the original filing is the authoritative source.
XPO Logistics, Inc. reported a transformed business for fiscal 2015, driven by a series of large acquisitions.
Revenue rose to $7.62 billiona from $2.36 billion in 2014, and net revenue reached $3.45 billion, with net revenue margin of 45.3% versus 27.8% a year earlier. The growth came mainly from the Norbert Dentressangle SA (ND) and Con-way Inc. acquisitions, which closed in June and October 2015 respectively, along with Bridge Terminal Transport and UX Specialized Logistics. Despite the higher revenue, the company posted a net loss of $191.6 million for 2015 (versus $63.6 million in 2014), and net loss attributable to common shareholders was $245.9 million, reflecting transaction and integration costs, higher interest expense of $216.7 million, foreign currency losses and increased intangible amortization.
The balance sheet expanded sharply, with total assets of $12.64 billionb and long-term debt of $5.27 billion at year-end 2015, compared with $2.75 billion of total assets a year earlier. Cash and cash equivalents were $289.8 million. Total indebtedness was approximately $5.41 billion, and the company noted that its ability to service this debt depends on cash flows and on realizing acquisition synergies.
The company stated it believes existing cash and revolver availability will be sufficient for existing operations, and it expects 2016 net capital expenditures of $475 million to $500 millionc. The filing also highlights ongoing risks, including independent contractor misclassification lawsuits in California and last-mile operations, a Department of Defense Inspector General and Department of Justice investigation involving Government Services, pension obligations assumed from Con-way and ND, and currency exposure, since a 10% stronger U.S. dollar would reduce net assets by approximately $31.1 million against the euro and $53.9 million against sterling. The company has never paid cash dividends on common stock.
02—Key points
Key Highlights
- Revenue of $7,623.2 million in 2015, up from $2,356.6 million in 2014, driven mainly by the ND and Con-way acquisitions
- Net revenue of $3,451.8 million, with net revenue margin of 45.3% compared with 27.8% in 2014
- Net loss of $191.6 million for 2015, and net loss attributable to common shareholders of $245.9 million, after a $52.0 million preferred stock beneficial conversion charge
- Total assets of $12,643.2 million and long-term debt of $5,272.6 million at December 31, 2015, following the Con-way ($2.3 billion) and ND (about $2.96 billion) acquisitions
- Transportation segment operating income of $51.6 million and Logistics segment operating income of $81.6 million, with corporate SG&A of $162.0 million
- Approximately $5.41 billion of total indebtedness and $1.0 billion revolving credit facility commitments, with a 100-basis-point rate increase estimated to raise annual interest expense by $16.0 million on the term loan and $10.0 million on the ABL facility
- Ongoing independent contractor misclassification litigation and a Government Services investigation, with management stating it does not expect a material adverse effect from these matters
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 29, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $7.62B$2.36B | +223.5% |
| Operating Expenses | $7.65B$2.40B | +219.2% |
| Operating Income | -$28.60M-$40.90M | +30.1% |
| Interest Expense | $216.70M$48.00M | +351.5% |
| Net Income | -$191.10M-$63.60M | −200.5% |
| EPS (Basic) | $-2.65$-2.00 | −32.5% |
| EPS (Diluted) | $-2.65$-2.00 | −32.5% |
| Shares Outstanding (Basic) | 92.80M53.60M | +73.1% |
| Shares Outstanding (Diluted) | 92.80M53.60M | +73.1% |
05—Questions
Frequently Asked Questions
Why did revenue and total assets increase so much in 2015?
The increase was driven by the acquisitions of Norbert Dentressangle SA, Con-way Inc., Bridge Terminal Transport and UX Specialized Logistics. ND contributed $3,463.1 million of 2015 revenue and Con-way contributed $896.2 million. Total assets rose to $12,643.2 million from $2,749.4 million at the end of 2014.
Is the company profitable?
No. XPO reported a net loss of $191.6 million for 2015 and a net loss attributable to common shareholders of $245.9 million. The filing attributes the increase in net loss mainly to transaction and integration costs, higher interest expense, foreign currency loss, other expense and increased intangible amortization.
How is the company financing its debt and capital needs?
XPO funded the Con-way acquisition with a $1.6 billion term loan and a $1.0 billion ABL revolving facility, and issued senior notes due 2019, 2021 and 2022 during 2015. It also raised $1,228.1 million of net proceeds from common and preferred stock. The company believes its existing cash and revolver availability will be sufficient for existing operations.
What legal and regulatory risks does the filing highlight?
The main risks include numerous lawsuits claiming owner-operators and contract carriers should be classified as employees, including California intermodal drayage claims and last-mile class actions. The filing also describes a U.S. Department of Defense Inspector General investigation and a Department of Justice Civil Investigative Demand involving Government Services. Management does not expect these matters to have a material adverse effect, but outcomes cannot be predicted with certainty.
Does the company pay dividends?
No. The company has never paid cash dividends on its common stock and has no immediate plans to do so. Its credit agreement restricts dividend payments, and it plans to retain earnings for business development. It did pay cumulative preferred dividends of $2.8 million in 2015.
06—Continue